Harford Executive Cassilly Offers Deep Dive on Proposed County Budget for Fiscal Year 2027

In a May 14 letter to the County Council, Harford County Executive Bob Cassilly provided the following in-depth analysis of his proposed FY 2027 budget, including his administration’s allotment of funding increases, the volatility and uncertainty of county revenue, and strategic decisions about the county’s fund balance.

“Harford County’s financial posture remains strong due to deliberate, disciplined fiscal management and decision-making and a firm commitment to operate within the means of our taxpayers. The FY27 proposed budget includes an increase of approximately $80 million in General Fund operating expenditures, roughly 10% growth over the prior fiscal year. As shown in the chart below, that increase is focused largely on education and public safety.

This increase includes both one-time and ongoing expenditures. My Administration has consistently emphasized that one-time revenues cannot responsibly support ongoing obligations without a sustainable long-term plan. As we all saw at the beginning of this term, an overly aggressive expansion of ongoing obligations undertaken by the previous administration and Council left us with a $90 million structural deficit that forced us to make painful adjustments over the past 3 budget cycles.

INCREASING REVENUE VOLATILITY
Property tax and income tax are the County’s two largest revenue sources used to fund essential services such as public safety, education, infrastructure, and daily county operations.

Property tax is the County’s most stable and predictable source of revenue; each one-cent change in the property tax rate can generate or reduce approximately $4 million annually. As demonstrated in FY2023, the 5-cent reduction in the property tax rate that year resulted in an estimated four-year revenue reduction of approximately $80 million.

Income tax revenue by comparison, can fluctuate significantly based on economic conditions and the Comptroller’s distribution methodology, making income tax the County’s most volatile and unpredictable revenue sources.

While County revenues are projected to increase compared to last year, much of that increase is attributable to income tax. Income tax revenue can shift quickly and without warning due to economic conditions, changes in federal or state tax codes, taxpayer movement/relocation, and adjustments in
State distributions, often after the budget has already been adopted. This is not a theoretical risk; it is a recurring reality that requires sensible financial management.

This level of uncertainty makes responsible budgeting especially challenging. Relying on extraordinary growth in income tax revenue to support ongoing expenses carries immense risk. The County cannot afford to budget overly optimistically or assume that current, short-term trends will remain. Committing ongoing expenditures to uncertain revenue creates structural risk that can lead to future shortfalls, service reduction, or increased burden on taxpayers.

A healthy fund balance is the County’s primary safeguard against this uncertainty. It provides the capacity to absorb revenue shocks, maintain continuity of essential services, and preserve financial stability during rapidly changing conditions.

SHORTFALL IN STANDARD FUND BALANCE TARGET
The Credit Rating agencies have indicated a AAA-rated county’s standard fund balance budget range should be 25% to 35%. As demonstrated in this chart below, Harford County continues to make progress growing our fund balance from 21.7% in FY25 to a projected 23.9% FY27. However, we still remain below the standard.

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Despite the present gap in the fund balance, we recognize progress and want to ensure we are not overly cautious, so my administration looks for opportunities to proactively allocate available funds toward one-time priorities, as opposed to recurring expenditures, when appropriate. In the FY27 proposed budget, we have strategically shifted $67M toward one-time expenditures to accomplish projects such as:
- HCSO Body Worn Cameras and Expansion of Safety Technology
- Harford County Public Schools Site Improvements: Safety and Paving efforts
- New central HVAC system for Edgewood Middle School
- Watershed Restoration Management requirements imposed by state law.

HIGHTENED BUDGET UNCERTAINTY
The importance of maintaining a proper fund balance is highlighted by the considerable budget uncertainties imposed on county governments by our state government. Each year Harford County is increasingly being compelled to absorb extraordinary funding increases beyond traditional rates of growth through unfunded state mandates and other state actions. For example:
1. With the State’s structural deficit projected to reach $5 billion over the next five years, it is certain that state funding for Maryland counties will be targeted for reductions to allow the state to avoid any cuts in runaway state spending.

2. We have been advised by the State Comptroller that nearly $12M of current allocations to Harford County reflect overdistributions by the State and will be reconciled downward in future payments. This issue is not isolated to Harford County; it is affecting jurisdictions across Maryland, and the expectation is that our exposure may extend beyond what has already been identified.3. The County is likely to receive additional unanticipated Blueprint related bills from the State, similar to the obscure Private Pre-K invoice in FY26; Blueprint burdens on county government have consistently grown worse in the last two years.4. The State has already shifted nearly $10 million in annual burdens to Harford County in the last two years to include: ▪ $5.2M Teacher pensions ▪ $2.5M Private Pre-Kindergarten & Non-Public Placements ▪ $2M MD State Department of Assessments & Taxes

5. Highway User Revenues have declined significantly from what would have been $40M annually under the old revenue sharing formula to roughly $5M in FY 27 with an impending fiscal cliff that could take it back to $2 million in FY 28.

6. Police aid from the State has not kept up with the drastic increases in the cost of policing.7. Program Open Space funds are being raided by the state to pay for other state programs.As the chart below shows, we have limited unassigned fund balance available to cover these many threats to budget certainty.

My Administration will not make short-sighted, politically motivated, fiscal decisions that create structural deficits or negatively impact future budgets. It has taken us three years since the last administration’s election year spending spree to realign the County’s on-going revenue with on-going spending, while at the same time having necessary reserves in place to anticipate the many factors beyond our control. The County continues to prepare to absorb increased costs associated with mandates that have unpredictable obligations.Once ongoing expenditures are committed, the County must have a plan to sustain them. We will not place agencies, departments, or outside organizations in the position of making future cuts because of imprudent spending decisions today, nor place the burden on taxpayers with a tax increase.CONCLUSIONMy Administration has approached this budget process with transparency, deliberateness, and a commitment to partnership. Throughout the development of the FY27 budget, we have met extensively with County agencies, departments, and external partners in what were productive, collaborative, and solution-oriented discussions. We do not view budgets in silos because County government cannot operate effectively that way. We will continue to demonstrate collaboration, trust, and partnership with the Council, agencies, and the community throughout this process.This Administration will continue to lead with fiscal discipline, responsible stewardship, transparency, and a commitment to protecting the long-term financial health of Harford County. We will maintain a strong fiscal position, prepare for uncertainty, and continue delivering essential services withoutoverburdening taxpayers. Every budgetary decision has been made with the best interest of Harford County’s taxpayers and citizens in mind, not just for today but for the years ahead.We appreciate the Council’s careful consideration of the FY27 Proposed Budget and stand ready to provide any additional information necessary to support your deliberations.”